A “perfect storm” of changes in Medicare and Social Security is coming and the signs couldn’t be clearer – starting on October 1, 2009 millions of Older Americans are going to be asked to pay more for their Medicare benefits while getting less from Social Security.

 The Obama Administration is clearly working with the Center for Medicare and Medicaid Services (CMS) and the Social Security to hold down costs. Earlier this year Medicare announced that it is providing Medicare Advantage plans with a .5% decrease in its monthly reimbursement rate. And now the Congressional Budget Office just announced there will be no cost of living increase (COLA) for Older Americans in their Social Security Checks. With average annual health care expenditures increasing by 6.7%, what will the health plans do? You can expect that doctors & hospitals will get less resulting in many canceling their contracts  and Older Americans premiums will go up resulting in many being forced back into Original Medicare.

Prior to January 1^st, 2010 you may need to select another Medicare Advantage or Medicare Supplement Plan or revert back to Original Medicare (and paying 20% for your medical and hospital services).

Here are the top 5 reasons why many Older Americans may face bankruptcy due to increased costs for health care and no cost of living increase from Social Security.

#5. Your Medicare Advantage Plan will be reimbursed less in 2010 (.5% decrease)

• Good: Medicare Advantage plans received 4.8% increase in reimbursement from Medicare per member, per month for 2009

• Bad: 2010 is first time health plans will receive a decrease in funding

• Ugly: 10 million Medicare Advantage members may see upwards of a $30-40 increase in their monthly premium starting on January 1^st, 2010

#4. No cost of living increase in Your Social Security Checks

• Good: COLA added 5.8 percent to Social Security benefits for 2009

• Bad: 2010 first time in 35 years no cost-of-living increases

• Ugly: zero COLA means that the basic Part B premium must stay the same for existing enrollees (but not all)

#3. Your Part B premium could rise to $119 a month in 2010 if…

• Bad: your Part B premium is withheld from your Social Security checks, or

• Ugly: you pay a higher Part B premium based on higher income, or

• Uglier: if you are newly eligible for Part B, your rate may be higher than those currently enrolled in Medicare

#2. Your Private Fee Insurance Plans (PFFS) won’t be here on October 1st

• Good: 2005 Medicare created PFFS plans for Older Americans in rural counties

• Bad: Starting in 2011 Medicare is going to require PFFS plans to have a contracted network

• Ugly: A network is equivalent to an HMO or PPO, most insurers will not renew with Medicare if they have to create a redundant plan similar to those products

#1. Bottom Line: More Costs Pushed onto YOU

• less choice as PFFS and PPO plans pull out of the market due to decreased funding,

• higher premiums by as much as $30-40 a month,

• higher copayments for doctors and specialists visits,

• NEW copayments for occupational therapy, x-rays, radiology visits, etc.,

• higher copayments for retail and mail order Prescription Drugs

• higher deductibles before your copayments even kick-in, and

• less extras like dental, hearing aids & other discounts

What is going on? Obama is shooting to sign a Major Health Care Bill Signed by October

The Obama Administration is clearly trying to control costs by asking each Secretary in its Cabinet to take action where they currently have authority to do so. It’s a critical first step in freeing up some cash for health care reform and necessary if Obama wants to meet his October deadline for signing it into law. It’s a smart play on their behalf, avoiding Congressional delays and lengthy national debate. Clinton used the “Balanced budget Act of 1997” to deliver a budget surplus and he did it by taking it out of Medicare and placing the burden on the backs of Older Americans. Obama is taking a different route and the result will be the same: half of Medicare Advantage plans may not renew, leaving millions with Original Medicare alone and the potential for facing medical bankruptcy.

What should you do on October 1^st?

First don’t panic. Here are three tips to help you weather the storm.

1. Buy Locally: Many of the national plans may not renew in your state. Start with your local health plans. Chances are good that your local plans survived and thrived after the Balanced Budget Act of 1997. Many will survive this economic downturn as well.

Tip: Be sure to ask how long they’ve been offering Medicare Advantage plans in your state.

2. Look for Value: The government reduced funding and the knee-jerk reactions by health plans – increase you premiums and increase your cost sharing. Your premium is “your first dollar” coverage – what you pay before you get sick. Copayments, deductibles and coinsurances are what you pay when you are “sick”. The lower the premium the higher your costs when you are sick.

Tip for Medical Coverage: The good news is that Medicare Advantage plans cannot charge you more than $3,700 a year in Out-of-Pocket Medical and Hospital costs for 2010. If you stay in Original Medicare or choose a Medicare Supplement your Out-of-Pocket costs may be unlimited. Make sure you understand your out-of-pocket costs.

Tip for Prescription Coverage: Look for the lowest Brand Name Mail-Order Copayment. If your copayments equal the retail price of the brand name drug, you are paying too much. Remember, you reach the coverage gap through cost sharing – what you pay in copayments and what the insurer pays in the remaining cost of the drugs. You might find your premium isn’t getting you much value and its time to find a better deal.

3. Your Doctor/Your Hospital: How long have you been with your doctor? How important is your specialists to maintaining your health? Changing doctors is a difficult choice when faced with the high cost of health care. HMOs offer you the best health care value for your money – hands down.

Tip: If your specialist is your most important relationship, call your local health plan and ask which Primary Care Physicians (PCP) he works with. Changing your PCP and keeping your specialists might save you hundreds or even thousands of dollars each year in premiums and out-of-pocket costs.

How much more will you pay for your health plan?

You’ll have to wait until October 1^st to find out. Medicare offers are great tool to help you project your annual medical and prescriptions costs. On October 1^st, you will be able to compare your 2009 coverage to your 2010 coverage. Depending on the plan you selected, you might see as much as a 30-50% increase across all cost sharing. The good news is that you can use this tool to see which plan is offering you the best coverage for your money.

These tools were designed to maintain transparency and provide consumers with a level playing field. You can also read more about Out-of-Pocket costs in our article “Health Care Coverage When it Counts.” Avoid getting caught up in the storm, visit Medicare’s Plan finder, identify your costs, save your work and print a copy to review on October 1^st. It wouldn’t hurt to call your Congressmen and let him know how you feel.

About the Author:

My name is Dana Cutter and I am Founder and Editor of Medicare Sherpa. Our staff spends their days searching the Internet for the best content and advice on retirement.  On our site you will find articles on Social Security, Medicare Benefits, Prescription Drug Benefits and more. Please feel fee to send me an email with ideas for content, site improvements or general help launching your online persona. I hope you will consider joining and I am looking forward to reading more about you online.

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